AFL bid casts cloud over Seven Network

The World Today Archive - Wednesday, 20 December , 2000 00:00:00

Reporter: Luisa Saccotelli

COMPERE: Well Channel 7 is not happy of course. The Channel which showed all of its colours during the Olympic Games and got good ratings to match now has a shadow over its future.

When the markets opened this morning, Seven's share price tumbled by 40 cents, down to $6.10. In fact the tidings for Seven look bad all round.

The markets are concerned that it appears to have lost the AFL rights but at the same time the market is also fearful that a costly counter-offer to retrieve that situation could sink the network financially.

Media analyst at Macquarie Bank, John Bugg, has been telling our reporter, Louisa Saccotelli, the markets are taking a stick to Seven.

JOHN BUGG: The West Coast has been there and it's been in the share [indistinct] for quite a while. I wouldn't have expected such an adverse reaction.

LUISA SACCOTELLI: Is that because people think that without football Seven is really in trouble?

JOHN BUGG: Yes, this really is a gap in their programming. At the same time it does give them fairly large budget which they can dedicate to another area.

LUISA SACCOTELLI: If they have to reinvent themselves, do you think they can?

JOHN BUGG: To a minor extent. Really that is an operating risk. Still, they do have the option to participate in this bid at this price. They may yet still secure the AFL rights, but at a higher cost which again will put a large dent in their profits.

LUISA SACCOTELLI: Well exactly, the markets have been scared that Seven might retain the rights but on very steep terms.

JOHN BUGG: Yes, that is a risk, bit of a Catch 22 situation. If they do bid, it's a large chunk of their profits gone; if not, that it's an operating risk in filling that programming gap.

LUISA SACCOTELLI: So either way the markets are concerned that Seven appears to have lost the rights but equally concerned that, if they put in a counter offer and win, they might end up paying too much.

JOHN BUGG: Yes, but at the same time there is an opportunity here and I think the market would be watching Seven closely to see 1) do they bid; and 2) if not, can they fill that gap. Obviously the share price has dropped around this event for a station that had fairly decent earnings track record and does provide every opportunity in a fairly favourable sector.

LUISA SACCOTELLI: Well I think Seven management has said that their profits might increase without football because it's so expensive to make. That could be one good outcome if they lose it.

JOHN BUGG: Compared to their normal programming, this is a lower margin product.

LUISA SACCOTELLI: What, compared to drama, say?

JOHN BUGG: Compared to really their broader programming.

LUISA SACCOTELLI: What about C7 without football? C7, Channel 7's pay television arm, what is it going to be left with? It will be starved for content surely.

JOHN BUGG: Yes, definitely. That venture really is at risk. But again that's not the be all and end all for Channel 7 and really the outcome for that venture is really at risk but again it was loss making. It was putting a dent in Seven's profits.

LUISA SACCOTELLI: What's happened to other sporting codes in other parts of the world when Murdoch has taken control of the game? Has that been seen as a good thing?

JOHN BUGG: He has bid aggressively for sporting rights around the world. And it's been fairly positive for the code itself. They get a lot of funding out of this and they do get a lot of media support as well. So generally, I think it's been viewed fairly positively by the codes around the world. So in that respect I think the AFL is certainly a winner out of this. They have a larger budget and possibly the promotion may increase even though Seven were doing a very good job of that.

LUISA SACCOTELLI: Well it is the same product. How will Channel 9, 10 co. be able to milk money out of this deal? They are paying just $100 million more at least than what Seven were offering. How are they going to make that product work harder for them?

JOHN BUGG: I think it's just a natural growth in the television media and that group themselves have probably more options available to them, the group [indistinct] operation within the pay TV media.

COMPERE: John Bugg is a media analyst at Macquarie and speaking to our reporter, Louisa Saccotelli.